Month: March 2017

A thought provoking post as always from Pete, which also led to some responses from Boak and Bailey and Mark Johnson amongst others. There was a lot I could relate to from Boak and Bailey, and while I couldn’t relate to “A pint of cask beer in my favourite pub ranges from £2.60 – £3.60, dependant on strength and purchase price.” from Mark’s post, he does have a point. I recently bought 7 beers from Borough Wines in Kensal Rise for £29, just over £4 a bottle. When I was at Mother Kelly’s a few week back, I was drinking halfs and two third for around £4 a serve.

I love the pub. I was a pub quiz champ and would often go to my local 2-3 times a week. Its where I met my wife. Then we had kids. Despite assertions between my wife and I that “things wouldn’t change”, they invariably do. Of course they do and its wonderful. One of the consequences is that I don’t get to the pub as often as I would like. An occasional lunchtime pint aside (Friday’s mostly), my pub visits are less spontaneous and less frequent. If my wife and I wanted to head out, we would need a babysitter at added cost. I will get out for a session every now and then where I might drink 5-6 beers, but at home I would never drink that much. Maybe a beer here and there, a few on the weekend. And yes, I do post the occasional beer (not all of them – I don’t think people want to see every time I drink a Gamma Ray) online too. Not sure how many others that drink at home more than before are recent parents too?

A light, fun and mischievous post. In my conversion to full beer snob, there is a number of beers that I once cherished that I have left behind. It wasn’t that long ago I was quaffing pints of Becks Vier from the local and drinking bottles of Becks in a multipack from Sainsburys. Guinness also served me well and still does. Its usually my default when there is macro’s or mediocre cask on offer. In recent times, a multipack of Dead Pony Club or Camden Hells cans has become a staple in the fridge.

3. Supermarket Craft. Various.

One of the things I do ponder is whether or not there is a craft beer bubble. Many point to the fact that craft beer only has less that 10% of the market therefore there is huge upside. While factually that might be the case, there are significant limitations to the addressable market for craft brewers and the potential upside is that craft beers maximum addressable market share might only be 25%. I’ll try and explain why below.

On-Trade

Recent BBPA figures show ontrade sales of 12.4m barrels of beer in 2016 (Barrel = 163L). This includes pubs, clubs, hotels and restaurants. I was unable to find a detailed breakdown beyond this, but let’s assume most of the beer is sold in pubs. I have used some old stats here to show the breakdown (from 2009) but directionally I am sure the are still relatively close. PubCos dominate the industry with over 50% of all pubs. It is difficult for craft breweries to get distribution into these PubCos. SIBA tries to assist with their BeerFlex scheme, but the addressable market for PubCos is small. Small and regional breweries make up 16%. Again, they will likely prioritise their own beer, therefore the addressable market is again relatively small. Freehouses are a third of all pubs, and the biggest opportunity for craft breweries. Other opportunities of course are taprooms and own premises here as you can sell 100% of your own beer at such premises.

Off-trade

Recent BBPA figures show ontrade sales of 13.7 m barrels of beer in 2016 (Barrel = 163L). Off-trade now exceeds on trade as outlined in the graph below which used BBPA figures.

What’s striking is how much on-trade has declined, rather than a huge increase from off-trade. There are around 10,000 less pubs over this timeframe which is driving the big reduction in numbers. I couldn’t find any breakdown for off-trade so have made a few assumptions: supermarkets account for 70%, corner stores 20% and speciality beer and wine shops 10%. What this crude analysis shows me is that the biggest opportunity for the craft brewer is in the supermarket. M&S you could reasonable argue have led the way with bringing craft beer to their shelves. Tesco, under Project Reset, have completely redesigned their range of craft beers, favouring US craft beer imports (Oskar Blues, Stone – albeit their german brewery, and Brooklyn), some UK brands (BrewDog, Vocation) with some regional variety) at the expense of brands such as Heineken and Carlsberg. And they are doing it in the way the know how – offering beer and cheap, cheap prices. Morrisons and Waitrose have also amended their beer range and it can’t be long before we see others such as Sainsburys and smaller players delve into craft beer. This will create opportunities for some breweries, should they wish to take it. And it is a big decision with big implications on the business model and brand of a craft brewery as well as the other routes to market.

How much impact will cheap, accessible and decent beer at supermarkets impact both other off-trade and on-trade beer sales?

Is really good beer, made and marketed well going to be enough to increase the addressable market for craft beer?

Or should craft breweries be looking at other ways to get to market?

Other opportunities of course are taprooms and own premises here as you can sell 100% of your own beer at such premises. As mentioned in a previous post, Wild Beer Cos crowdfunding campaign showed the revenue potential from their own premises. Magic Rock taproom has become such a destination, there is often lines out the door, much to Mark Johnson’s bemusement.

Bude, wheres my beer? A funny thing happened. Like anyone else who is into beer twitter you will have heard of the phenomena that is #CraftBeerHour. The premise is simple, get online between 9pm and 10pm on a Tuesday and share a drink and interact with fellow beer enthusiasts. It has built such an audience that it now features breweries, festival organisers and other beer folk who use the hour like an online Q&A. To further enhance the experience, Tom arranges with the feature brewery for free samples to be sent in advance of the tasting. Back to my story. An email popped into my inbox asking people to enter the draw for free samples for next week’s brewery, Bude Brewery from Cornwall. Rather than wait until later I entered straight away. I must have been the first as it triggered a response from Tom on twitter. To keep it democratic Tom pulls the names from a hat and broadcasts the draw live on twitter. This is how far down the craft rabbit hole I have gone – I, along with around 20 others, watched the draw live. And whose name was deftly plucked from the hat first? Yours truly! Phoa! I never win anything, I said. Now to wait for the beer to arrive. Sadly it didn’t turn up in time for last Tuesday’s #CraftBeerHour, however did arrive in time for the weekend. I have managed to have at least one of the beers, the Black Rock Porter, which came in a 500ml bottle. Beautiful dark colour, with relatively thick head. Nice dark chocolate and roasted malts with just enough sweetness. Stay tuned for the Pale Ale.

Gipsy Hill Brewing Company: I attended a meet the brewer event with Gipsy Hill Brewing Company at the shiny new Micro Beers craft beer shop in East Sheen, South West London. Micro Beers is relatively new and follows the trend of drink in / take away with four rotating keg lines in addition to well stocked selection of beers. East Sheen is in a bit of a no man’s land between Putney and Richmond and while it’s on the train line, the regular express services don’t stop here and its serviced mainly by the less frequent ‘all stations’ services. Regardless, and to my surprise, this suburban enclave drew a rather large, interested and educated crowd curious about Gipsy Hill and craft beer more generally. I first encountered Gipsy Hill at the now defunct Winter Brew Festival in November 2014. Their signage stood out, three white guys in coloured shirts holding a Gipsy Hill sign. Given we were at a craft beer festival, my initial reaction was that the Gipsy in Gipsy Hill referenced the fact they were Gipsy brewers. It only highlighted my lack of knowledge about the suburbs of South London. MBA educated Sam McMeekin gave up a promising career in venture capital micro-finance after becoming disillusioned with a new job. Rather than handing over cash to driven entrepreneurs, he wanted a challenge of running his own business front to back; branding, marketing, financials, really making and building something of his own. He teamed up with Charlie Shaw, who was working at 5 Points Brewery and Gipsy Hill was born. Sam explained the brewery, his story, walked through 4 beers including core beers Hepcat (Session IPA) and Southpaw (Amber Ale) and new beers Day Tripper (American Pale Ale) and Nomad (Milk Stout). Their beers are named after groups of people, with previous beers including Bogan (NZ Pale Ale), Drifter (IPA) and newly released Walloon (Belgian IPA) which pays homage to the Belgium region known for its cycling and brewing heritage and released right in time for the Belgian cobble classics. Sam also reflected on the challenges of scaling up given their recent expansion as well as their plans for improving quality and output with investments in water treatment and a canning line. All in all it was an enjoyable experience and great, as always, to hear from passionate craft brewers.

Why don’t more craft breweries contract brew?: I watched this very funny video parodying things Australian craft beer drinker say. You can watch it here on vimeo.

One thing I got a chuckle out of is the ‘contract brewed’ gag. But openly talking about contract brewing seems rare in the UK, or is it that it’s just not that common? Five Points Brewing Co announced in their year-end blog that they were contract brewing some (only Kegs, cans are brewed and packaged at Five Points) of its Pils beer to a ‘family owned, independent brewery in Belgium’, in an arrangement reminiscent of Camden Town’s. I can understand their rationale too, which is outlined in the blog, but can be summarised as “At Hackney Downs we are hemmed in on all sides, and after several months of (currently unsuccessful) negotiation with our neighbours and with Network Rail, sadly it looks like we’ve run out of expansion options at our current site”. But surely 5 Points aren’t the only ones with this problem? That sounds like any typical craft brewer, in an industrial estate or in a railway arch – hemmed in – waiting for an opportunity for a close or woe-betide adjacent lot to become available. Often this leads to inefficiency, such as taking an hour to unpack assorted brewery paraphernalia only to spend the same amount of time repacking it that same evening. A quick google search of contract brewers in the UK reveals a number of options, namely traditional brewers with extra capacity to spare. But again, it’s unclear whether, when faced with barriers to expansion, craft breweries seriously consider contract brewing as another way to grow in the face of barriers to scaling up quickly to meet demand.

What Toast Ale and Brewgooder can learn from Kickstarter, Brewing Business Models and Left Hand Brewing Co

Kickstarter: this week saw Kickstarter, the creativity focused crowdfunding platform, release its first Benefit Statement since becoming a Public Benefit Corporation. In 2015 Kickstarter changed its corporate entity from a for-profits, incorporated company to a public benefit corporation. According to their statement at the time, this means “positive impact on society becomes part of a Benefit Corporation’s legally defined goals.”. You can read their charter here and their first benefit statement here. While they remain a for-profit organisation, they have some very specific goals, including their approach to diversity, executive pay and taxation. In addition, Kickstarter will annually donate 5% of its after-tax profit towards arts and music education, and to organizations fighting to end systemic inequality and in their statement have outlined the projects that have received the funding. This got me thinking about both Toast Ale and Brewgooder, both breweries founded on a similar mission to benefit the public. Both Toast Ale and Brewgooder are focused on totally admirable causes and both are garnering no shortage of publicity and that should be applauded and appreciated. Toast Ale is focused on the problem of food waste, to help turn food, and more specifically bread waste into a product that can be used and sold. Brewgooder focused on bringing fresh water to people that need it most. Both have a stated goal to donate 100% of profits. This is where I have questions. Firstly, how profitable are a start up brewery? If Cloudwater’s results after 2 years of trading are anything to go by, it’s a challenge. Stella Artois have this week announced a similar water campaign, with a donation based on units sold, rather than profits. Kew Brewery also provides a charitable donation on units sold. This is more guaranteed, and punters who support the beer know their contribution is based on the fact they have bought the beer, rather than the breweries ability to turn a profit. But even if they are turning a profit and donating that to their admirable causes, why haven’t they announced it? I know there is a huge difference between Kickstarter, a company with an 8 year track record and a multi-million dollar revenue line, and start ups like Toast Ale and Brewgooder, however when marketing is based solely on this messaging, a little more transparency regarding their philanthropic pursuits, would be appreciated.

Business models: unless you didn’t read last week’s post, by now you will have noticed that Wild Beer Co is crowdfunding in a bid to raise £1m (which at the time of writing they had raised £993,080). They are on track to smash their target and rightly so as they appear to have done their homework, with a very well prepared campaign and business case. You would expect no less however when one of your non-executive directors is the COO/CFO of Crowdcube. What stood out for me in the financials was how much having two pubs, Jessop House in Cheltenham and Wapping Wharf in Bristol, strengthened their financial position. It got me thinking about the different business models of craft breweries. There is the opposite of the Wild Beer Co approach where pubs have started breweries, such as Long Arm Brewing started by the ETM Group, or the plans for the new brewery on the site of The Prince, N22, sister pub of the Dukes Head. Both Camden and Beavertown started in the basement of pubs. Or the traditional craft brewery in a railway arch / industrial lot with a makeshift taproom, or even Yeastie Boys, who design recipes, packaging, undertake the marketing and sales and partner with a brewery to brew the beers to their exacting standards. I’m sure there is advantages and disadvantages to every business model, but its up to the founders to really decide where they want to begin and what they want from their brewery. Do the drinkers really care?

Left Hand Brewing Company: I attended a fantastic event at Brew by Numbers last week, who hosted Left Hand Brewing Company, from Longmont Colorado for a special event of big beers. Chris Hall was delighted to start the night with their 55|04, an 8.5%ABV Double IPA. Chris Lennert, the effervescent COO of Left Hand was also there, the final stop of a whirlwind visit to Britain and Ireland, championing independence and appreciating good beer. I had met Chris at an event Left Hand did with Camden and Beavertown around 2 years ago. What really stood out for me that night was how Chris was the only one from the three breweries there who made the effort to go and speak with everyone in the room – It certainly made an impression. What I remembered this time was their beer – St Vrain, a 3 year old Belgian Tripel, Widdershins, a 3 year old oak aged Barley Wine, and Wake Up Dead, a 2 year old oak aged Imperial Stout. (You can find some picture of the event on my instagram @bushcraftbeer) All were exquisitely made and aged, especially when compared with some of the younger, but no less accomplished beers Brew by Numbers were serving. While you may know Left Hand Brewing from their Nitro Stout, and having a flagship beer certainly helps (think Brooklyn Lager, Goose IPA), there is always more to a good American Craft Brewery, especially one that is 24 years old, than a flagship beer. And usually some really great people too.